Gordon Brown is to risk the wrath of traditional Labour supporters by bowing to boardroom pressure and announcing in the budget even more generous tax breaks on share options than those first sketched out last year.

Four months ago the chancellor angered unions by announcing that small, high risk firms would be able to offer tax friendly share options worth up to £100,000 each to 10 key employees to help them re cruit and retain high calibre employees.

However, after complaints from industry that the proposal was too timid, Mr Brown is now understood to be in favour of expanding the scope of the so-called Enterprise Management Scheme to more staff.

The top employees will pay no income tax or national insurance on their share options and be able to sell the shares at a significantly reduced rate of capital gains tax.

The chancellor's thinking is believed to have been heavily influenced by the recommendations of Lord Trotman, the former chairman and chief executive of the Ford motor company who has been conducting a review of government policy regarding small and medium sized enterprises.

In an interview with The Guardian - the first since his appointment - Lord Trotman said the underlying strength of the economy provided another opportunity to improve the performance of SMEs.

He said: "Britain is by no means a laggard in the area of supporting small businesses, but it is not world class.

"It's very good, but it is not an equal performer to the US, Canada or Israel."

Tax was a big component of an enterprising business culture. While calling Britain's tax structure one of the most competitive, he said it could be improved.

He said that share options were particularly important to young, growing businesses which in many cases had low revenues, no profits and little or no cashflow with which to reward employees.

The chancellor's commitment to enterprise will be underlined by the introduction of a new share ownership scheme, costing some £400m a year, which will allow firms to give all employees up to £3,000 of shares free of income tax and national insurance contributions and further reforms of the capital gains tax regime.

He is expected to reduce the qualifying period for reduced CGT on business assets to four years from 10.